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What are the duties and limits of a financial power of attorney?

On Behalf of | Feb 19, 2024 | Powers of Attorney |

A financial power of attorney (POA) in Tennessee is a legal document that grants an individual, often referred to as an agent, the authority to make financial decisions on behalf of another person, known as a principal. This arrangement can be beneficial when a principal can’t manage their financial affairs due to illness, absence or incapacity.

A POA can cover a wide range of financial activities, including but not limited to managing bank accounts, buying or selling property, filing taxes and handling investments. Understanding Tennessee’s laws’ specific duties and limitations is crucial for an agent and a principal to ensure that a POA serves its intended purpose without overstepping legal boundaries.

Duties of an agent under a financial POA

In Tennessee, the agent is expected to adhere to a standard of conduct that prioritizes the principal’s best interests. They must act with care, competence and diligence. They should also avoid conflicts of interest and maintain the principal’s estate plan as much as possible.

They are also required to keep a detailed record of all transactions made on behalf of the principal. This record-keeping duty ensures transparency and accountability, providing a clear audit trail of the agent’s actions. The agent must act in accordance with the principal’s expectations to the extent they are known. They must consider the principal’s values and previous decision-making patterns when in doubt.

Limitations of a financial POA

The document’s specifics and state law define the scope and limitations of a financial POA in Tennessee. The agent’s power is limited to the authority expressly granted in the POA document. This means the agent can’t assume powers not specified in the document.

Tennessee law also prohibits the agent from making decisions that wouldn’t be in the principal’s best interests or that would benefit the agent at the principal’s expense. Additionally, the agent can’t execute particular actions, such as altering the principal’s will, under a financial POA, as these powers are explicitly restricted by law.

Creating a comprehensive POA is critical to ensure that a principal’s affairs are handled appropriately. Seeking legal assistance while getting the document set up makes it easier to be sure that everything is in order so that a POA can be legally enforced if the time comes.